Markets cautious after EU summit

 

An extraordinary EU summit has stirred up the member states more than it has stirred the financial markets looking for signs of single currency revival and stability.

Prime Minister David Cameron's veto of a 27-nation treaty change to toughen economic rules in the eurozone grabbed all the immediate headlines.

But behind the institutional wrangling, the deal on a eurozone-only "fiscal compact" holds the promise of a fightback in the currency propaganda war.

Markets rose after the summit declaration setting out the terms of the "compact".

The question is whether that trend will continue on Monday or whether, as so often with the recent series of eurozone-related summits, markets will decide there is nothing to smile about at all.

The summit conclusions reiterate a "reinforced architecture for Economic and Monetary Union", including the "compact" and "significantly stronger co-ordination of economic policies in areas of common interest".

A new "fiscal rule" includes:

:: A eurozone pledge to maintain "balanced budgets" by writing into national law a requirement to keep any structural deficit below 0.5% of GDP;

:: "Automatic consequences" (sanctions) for any eurozone country breaching a deficit ceiling of 3% of GDP.

:: Strict monitoring by the European Commission of draft national eurozone budget plans, with the Commission empowered to ask for changes;

:: Work to be studied at another summit next March on the further deepening of "fiscal integration", which "will imply more intrusive control of the national budgetary stance by the EU".

The declaration pledges stronger policy co-ordination and governance "without undermining the internal market" and vows that the increased financial firepower of the EU's bailout fund - "leveraged" from about 280 billion euro (£239 billion) to about 600 billion euro (£512 billion) - will be "rapidly deployed".

A European Stability Mechanism, worth a maximum of 500 billion euro (£427 billion) in loans, will be brought into force a year early in July 2012.

With eurozone member states also committed to loan 200 billion euro (£170 billion) to the International Monetary Fund, the hope is the figures will demonstrate a gradual reinforcement of eurozone defences.

German chancellor Angela Merkel said before leaving the summit that the accord was "a breakthrough to a stable union", demonstrated by the fact that only one country - the UK - was refusing to commit to the "fiscal compact".

She went on: "The measures for funding show that they (the 26 member states) have recognised how serious the situation is in Europe."

She said the deal done in Brussels demonstrated that "we have once again regained credibility".

She added: "Step by step we have achieved a new basis for trust."

But, as ever in this eurozone crisis, the markets will have the last word.

PA

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Stockbroker

£Basic (OTE) + Uncapped Commission: Guru Careers: A Stockbroker (qualified / p...

Recruitment Genius: Financial Adviser

£20000 - £60000 per annum: Recruitment Genius: Are you recently QCA Level 4 qu...

SThree: Graduate Recruitment Resourcer

£20000 - £22500 per annum + OTE £30K: SThree: SThree Group have been well esta...

Guru Careers: Application Support Analyst / 1st Line Support

£25 - 30k: Guru Careers: We are seeking an Application Support Analyst / 1st L...

Day In a Page

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

How a costume drama became a Sunday night staple
Miliband promises no stamp duty for first-time buyers as he pushes Tories on housing

Miliband promises no stamp duty for first-time buyers

Labour leader pushes Tories on housing
Aviation history is littered with grand failures - from the the Bristol Brabazon to Concorde - but what went wrong with the SuperJumbo?

Aviation history is littered with grand failures

But what went wrong with the SuperJumbo?
Fear of Putin, Islamists and immigration is giving rise to a new generation of Soviet-style 'iron curtains' right across Europe

Fortress Europe?

Fear of Putin, Islamists and immigration is giving rise to a new generation of 'iron curtains'
Never mind what you're wearing, it's what you're reclining on

Never mind what you're wearing

It's what you're reclining on that matters
General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

Chuka Umunna: A virus of racism runs through Ukip

The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
Yemen crisis: This exotic war will soon become Europe's problem

Yemen's exotic war will soon affect Europe

Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
Marginal Streets project aims to document voters in the run-up to the General Election

Marginal Streets project documents voters

Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

The real-life kingdom of Westeros

Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
How to survive a social-media mauling, by the tough women of Twitter

How to survive a Twitter mauling

Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

At dawn, the young remember the young

A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

Follow the money as never before

Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

Samuel West interview

The actor and director on austerity, unionisation, and not mentioning his famous parents
General Election 2015: Imagine if the leading political parties were fashion labels

Imagine if the leading political parties were fashion labels

Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence